Steinhoff says four large investor groups support R17bn settlement proposal

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  • Four large groups of claimants have come out in support of Steinhoff's global settlement proposal for the litigation it is facing stemming from the sharp drop in its share price. 
  • The retailer says the four groups will now suspend their litigation against it and its former directors.
  • Steinhoff has put forward €943 million (roughly R17 billion) to be split among all claimants, who have been divided into two broad classes. 

Four large groups of claimants have thrown their weight behind Steinhoff's global settlement proposal to settle litigation stemming from the sharp drop in its share price, the retailer announced on Wednesday.

In an update to shareholders, the Stellenbosch-headquartered conglomerate said that Burford Capital, Deminor Recovery Services, and DRRT/Therium would recommend that their constituents, which include South African investors, support Steinhoff's proposal.

"Any litigation initiated by these active claimant groups against Steinhoff and its former directors and officers will be suspended immediately," it said.

In July last year another large claimant group, European Investors-VEB, voiced its support for the proposal.

Steinhoff is facing over 100 legal claims in South Africa and Europe amounting to more than R130 billion stemming from the steep plunge in its share price in late 2017 when its CEO Markus Jooste abruptly resigned and accounting scandal first came to light. The group's shares have fallen by over 95% since Jooste's resignation. 

Last year it proposed a settlement to all its litigants to resolve all the claims it is facing. It has put forward €943 million (roughly R17 billion) to be split among all claimants, who have been divided into contractual and market purchase claimants.

The retailer has said it cannot afford to offer litigants more, and warned that it may face liquidation if the settlement proposal is not accepted, due to a roughly €10 billion debt burden.

Insurance groups underwriting liability cover for directors, as well as its former auditors, Deloitte, have both added another €78 million each (R1.3 billion) to the proposal, subject to conditions.

The four groups are all market purchase claimants, meaning they can expect payouts of up to 10%* of their verified claims if the proposal goes ahead. Verified contractual claimants can expect higher payout ratios, of between 18% and 29%. 

'Unfair' 

While the announcement of support by the four claimant groups is a win or Steinhoff, not all litigants who lost out in its share price plunge have come out in support of the deal.

Dublin-headquartered Hamilton, which is pursuing R14 billion in claims against Steinhoff, has gone to court in an attempt to stop the process, arguing that the terms of the settlement proposal are unfair. Steinhoff is opposing the action, and has called Hamilton's motion "unjustified and premature".

As Fin24 reported last week Steinhoff’s BEE partner Lancaster 101 is suing the SA Reserve Bank for allegedly enabling Steinhoff to move assets worth €19 billion overseas while the group was technically insolvent – and allowing its local entities to settle claims by foreign investors "to the detriment of the South African economy". Both the bank and Steinhoff say they will oppose the Lancaster's litigation.

The settlement does not need 100% of claimants to vote yes for it to proceed, meaning that Steinhoff can afford to have some litigants vote against it at upcoming hearings in South Africa and the Netherlands. 

* Update: This article has been updated to reflect that market purchase claimants can expect to get a payout of up to 10% of their verified claims when contributions from insurance groups underwriting liability cover for directors and Steinhoff's former auditors Deloitte are added.

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